As we enter 2014 we also enter a new phase of mortgage regulations. Several new rules designed to prevent another housing bubble from emerging are set to take effect this week. For borrowers, the new rules will mostly mean that it will be a little harder to qualify for large loan amounts. The most substantial change for borrowers is a tightening of debt-to-income ratio limits on conventional (Fannie and Freddie) mortgages. There is now a fixed 43% debt-to-income ratio cap on conventional mortgages that cannot be exceeded. That means all of a borrowers monthly debt payments, including the mortgage, should not exceed 43% of gross monthly income. For middle class families this could have an impact on the amount they can borrow to purchase a home or to refinance.
Of course there is wisdom in keeping DTI ratios low, but in some cases it helps to have more wiggle room with DTI. The good news is there are alternatives to conventional mortgages though. The new debt-to-income ratios don’t apply to FHA or VA loans for instance. Plus there are other alternatives that can be investigated on a case by case basis.
Contact us today to learn more and see which government refinance or home purchase programs best fit your situation.